Aetna posts30% increase in revenues due to " solid HMO growth "
"This is the seventh-consecutive quarter of growth in operating earnings per
share for Aetna," said Aetna Chairman and CEO Richard L. Huber.
"Aetna U.S. Healthcare continued to post solid commercial HMO membership
increases, and as expected, the completion of the Prudential HealthCare
acquisition on August 6, 1999 also added to results for the quarter.
"Aetna Financial Services benefited from both market growth over the last year,
as well as continued sales momentum.
Note: HRC derives 60% of income/profits from HMOs.
If a " good HMO ( is there such a thing? GGGG ) like Aetna does well,
Then HRC will do well.
Looking forward to HRCs eps report Nov. 3rd,
TA
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aetna.com
AETNA REPORTS THIRD QUARTER 1999 RESULTS
-- Revenues Increase 29%; Operating Earnings Per Share Up 32% --
HARTFORD, CT, OCTOBER 28, 1999 -- Aetna (NYSE: AET) today
announced third quarter 1999 operating earnings of $193.1 million, or $1.27
per common share, a 32 percent increase in operating earnings per share over
the $152.2 million, or $0.96 per common share, excluding certain other items,
reported in the third quarter of 1998.1 First Call analyst consensus estimate of
operating earnings was $1.16 per common share.
"This is the seventh-consecutive quarter of growth in operating earnings per
share for Aetna," said Aetna Chairman and CEO Richard L. Huber.
"Aetna U.S. Healthcare continued to post solid commercial HMO membership
increases, and as expected, the completion of the Prudential HealthCare
acquisition on August 6, 1999 also added to results for the quarter.
"Aetna Financial Services benefited from both market growth over the last year,
as well as continued sales momentum.
"In our international business, premiums grew virtually across the board, as
geographic diversity again balanced the impact of currency fluctuations and the
economic downturn in Brazil.
"While we remain pleased with the market positions of our core businesses,
recent market developments have convinced us of the need to sharpen our
efforts at creating shareholder value.
"We have repurchased approximately 2.3 million shares since we announced
our $1 billion share buyback program in early October and over 4 million
shares year to date. We intend to continue to aggressively repurchase shares as
conditions warrant and believe this is an appropriate way to return value to
shareholders.
"In addition, we will continue to focus on further improving our business
fundamentals to achieve strong growth, aggressive cost controls and maximum
operating efficiencies," Huber said.
On the operational front, the company has completed the testing and
certification of its IT systems for Y2K readiness.
Aetna U.S. Healthcare Operating Earnings Increase 26 Percent
Aetna U.S. Healthcare, which provides a full spectrum of managed care,
indemnity, and group insurance products and services, reported a 26 percent
increase in operating earnings for the third quarter 1999. Operating earnings,
before Year 2000 costs, were $148.7 million, compared with $118.4 million in
the prior-year period, primarily due to HMO membership growth, improved
Medicare medical costs and higher net investment income, partly offset by
higher expenses. Also contributing to higher results was the addition of
Prudential HealthCare (PHC), including the benefit of supplemental
Administrative Services (ASO) fees and reinsurance recoveries.
On a standalone basis, Aetna U.S. Healthcare's commercial HMO membership
grew 9 percent from year end. With the addition of Prudential HealthCare's 5.3
million health members, total health membership served was 21 million as of
September 30, 1999. This includes 10.3 million HMO members. The company
now has 706,000 Medicare HMO members, including PHC's 119,000
Medicare members.
Excluding Prudential HealthCare, Aetna U.S. Healthcare's commercial HMO
medical loss ratio (MLR) was 82.3 percent, essentially flat from both the
prior-year period and the second quarter 1999, as rising premiums kept pace
with medical cost inflation. On a combined basis, the commercial HMO MLR
was 83.7 percent for the third quarter 1999.
The Medicare HMO MLR was 90.9 percent excluding Prudential HealthCare,
well within the company's targeted range, and significantly lower than the
prior-year period, due to the impact of exiting certain states and counties. The
third quarter Medicare MLR was slightly higher than in the second quarter,
however, reflecting higher medical costs.
HMO SG&A expenses were 12.2 percent of revenues, reflecting the inclusion
of Prudential HealthCare's higher expense base, as well as some seasonally
higher marketing and enrollment expenditures in the Aetna U.S. Healthcare
business.
Group Insurance and Other Health operating earnings were lower than the third
quarter 1998 due to higher expenses and unfavorable disability experience,
partially offset by favorable reserve developments for NYLCare life and
disability products and higher net investment income.
Aetna Financial Services Operating Earnings Increase 22 Percent
Aetna Financial Services (AFS), formerly Aetna Retirement Services, which
markets a wide array of financial and retirement products to nonprofit
organizations, government entities, small businesses and individuals, reported
third quarter 1999 operating earnings, before Year 2000 costs, of $58.0
million. This represents a 22 percent increase over the prior-year period,
excluding results from the individual life insurance business that was sold in
October 1998.
Third quarter 1999 results for AFS were fueled by higher assets, due to market
performance as well as business growth. AFS assets under management and
administration grew 31 percent over the prior year to $63.0 billion. Strong sales
momentum continued in the quarter, with year-to-date sales more than twice
1998 levels for the same period.
Aetna International Operating Earnings Improve 8 Percent
Aetna International, which primarily sells life insurance, health and financial
retirement services products in targeted emerging markets in 16 countries,
reported third quarter 1999 operating earnings, before Year 2000 costs, of
$45.9 million, or 8 percent higher than the $42.5 million reported in the third
quarter 1998. International operating earnings were lower on a sequential basis.
Results were higher than the prior year due to strong premium growth in the
Mexican businesses, favorable tax developments, as well as improvement in
Taiwan, substantially offset by declines in Brazil. Aetna International recorded a
loss in Brazil primarily due to the imposition of a premium tax, which increased
expenses, as well as the negative effects of currency devaluation and the
country's continuing recession. Aetna is continuing to monitor the ongoing effect
of recessionary economic conditions in Brazil and Argentina.
The Taiwan earthquake, which occurred in late September, did not have a
material impact.
Corporate segment experienced higher interest expenses due to the
acquisition of Prudential HealthCare, partially offset by lower other corporate
expenses.
Total Aetna Revenues, including net realized capital gains or losses, for the
third quarter of 1999 grew 29 percent, primarily due to the acquisition of
Prudential HealthCare. Third quarter 1999 revenues were $7.0 billion, up from
$5.4 billion for the prior-year period.
Net Income for the third quarter 1999 was $165.3 million, or $1.09 per
common share, including $27.8 million of net realized capital losses, primarily
due to a loss on the sale of Aetna Canada. This compares to $212.4 million, or
$1.36 per common share, for the third quarter of 1998, which included a $44.2
million after-tax reserve release related to discontinued products in the Large
Case Pensions segment, net realized capital gains of $16 million after tax, and
$24.3 million in earnings from the domestic individual life business, which was
sold.
In a recent development, the Securities and Exchange Commission is
conducting an accounting review of Aetna's public filings, including accounting
for Prudential HealthCare and other acquisitions and dispositions. Aetna
believes its accounting is appropriate, and it has been thoroughly reviewed and
supported by its outside auditors. However, the review process is not
complete.
1 Operating earnings exclude net realized capital gains or losses and include after-tax Year
2000 costs ($14.1 million in third quarter 1999 and $36.5 million in third quarter 1998). The
certain other item in third quarter 1998 is a discontinued products reserve release of $44.2
million after tax. Third quarter 1998 results also include $24.3 million in operating earnings
from the domestic individual life insurance business, which was sold on October 1, 1998.
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